Capital Growth

Definition

Capital growth (or capital appreciation) is the increase in the market value of a property over time. It is typically measured as an annual percentage change. Capital growth is realised when the property is sold for more than its original purchase price and is one of the two main ways investors profit from property (the other being rental income).

Why It Matters for Property Investors

Capital growth has historically been the primary wealth-building mechanism for Australian property investors. Over the past few decades, well-located Australian properties have achieved average annual growth of 6–8%. Suburbs with strong growth drivers — proximity to transport, employment hubs, schools, and infrastructure projects — tend to outperform. However, past growth does not guarantee future performance, and investors should look at supply constraints, population growth, and economic fundamentals when assessing growth potential.